Sequoia funds Cernet expansion programme
Daniel Ren in Shanghai
Sequoia, a United States venture capital firm that invested in Yahoo and Google, has provided financing for the expansion plans of Cernet Koncept Network, a mainland internet company targeting the country's 27 million college students, sources said.
Cernet Koncept, operator of cdrean.com, is a subsidiary of the China Education and Research Network, a state-backed agency in charge of internet infrastructure construction on college campuses nationwide.
Neither Sequoia nor Cernet would disclose the financing amount but it was definitely a double-digit million US dollar capital infusion, according to Cernet Koncept chief executive Kuang Peng.
'Cernet is a one-of-a-kind company that enjoys a monopoly in its area,' said Neil Shen, founding managing partner of Sequoia Capital China. 'We are bullish on its outlook.'
The fund would be used to develop new valued-added services to cater to mounting demands for information and recreation among college students, Mr Kuang said.
On the mainland, telecommunications operators provide customers internet access but the Ministry of Education set up the China Education and Research Network to build 'information highways' for university students. Nearly 27 million students connect to the internet via the separate network, which covers 3,500 schools and research institutions nationwide.
'Basically, investors shun internet-related companies nowadays because it is difficult to create a profitable model,' said Lu Liang, a manager at Hotung Venture Capital. 'But it seems that Cernet Koncept can make a difference with a monopoly in the education market.'
Sinomonitor, a business data supplier, estimates that college students spend 300 billion yuan (HK$341 billion), or 11,860 yuan per head, a year.
'The media platform will also be appealing to big companies who want to advertise on it because university students are potentially the major powerful purchasers in future,' Mr Kuang said.
'We hope to launch an initial public offering in 2011,' he said. 'The priority is the A-share market.'
Number of university students who connect to the internet via Cernet: 27m